Making sense of economic indicators: a consumer's guide to indicators of real economic activity

A framework for assessing economic indicators regarding its applications, importance and limitations was developed using a bivariate regression model. In using economic data in forecasting future economic trends, analysis showed that the forecast horizon of an indicator is essential in choosing and evaluating the indicator. This is true for composite indicators, which can effectively forecast up to a six month horizon only. The term and public/private spreadsheets were shown to contain substantial common and independent information. Lastly, the model showed that the general purpose target variable aimed for by previous economic forecasting literature may not exist in terms of real economic activity.